This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.  

In this Edition, we examine the International Organisation of Securities Commissions’ consideration of ETF behaviour during COVID-19, amendments to the Corporations Act in relation to penalties relating to continuous disclosure, public M&A trends for 2021 and the Treasury’s exposure draft imposing financial reporting and auditing obligations on registrable superannuation entities.

This week’s Risk Radar discusses the key takeaways of the Intergovernmental Panel on Climate Change’s report on the impact of climate change to date, and how Boards will need to respond to the risks posed by these matters.


IOSCO publishes results of examination of ETF behaviour during COVID-19 induced market stresses. Directors of listed companies may already have witnessed the impact of exchange traded funds (ETFs) on share prices when the funds rebalance or alter mandates.  Recently, the International Organisation of Securities Commissions (IOSCO) board published a report that examines the behaviour of ETFs during the COVID-19 induced market stresses, drawing on market data and observations gathered over the course of the first half of 2020. The report reviewed the operation and activities of the primary and secondary markets of ETFs during this period and found that, while COVID-19 volatility was a significant stress test to the ETF structure and operation, no imminent risks were identified from a regulatory or financial stability perspective. In fact, the ETF structure was “relatively resilient” throughout the period. See IOSCO’s media release.

Feedback on options for regulatory reforms to strengthen cybersecurity practices. The Department of Home Affairs has released a discussion paper, Strengthening Australia’s cyber security regulations and incentives, which outlines options for cybersecurity expectations and standards in corporate governance and the dealing of information assets by large businesses.  The paper offers three options for how the Government might regulate in this space, (1) maintaining the status quo, ie leaving it to companies to manage their own cyber risks as they see fit, (2) implementing a voluntary governance standard describing the recommended responsibilities for large companies (as identified through a co-design process with industry) and (3) mandatory governance standards.  G+T’s article discusses the benefits, costs and net impacts of the options proposed by the paper.


Amendments to Corporations Act facilitate softer continuous disclosure.  As reported in previous editions of Boardroom Brief, there has been a great deal of parliamentary consideration as to whether temporary amendments to the continuous disclosure regime in the Corporations Act should become permanent.  On 13 August 2021, the Treasury Laws Amendment (2021 Measures No 1) Act 2021 received Royal Assent, and came into effect on 14 August 2021.  Notably for Directors, the amendments mean that companies and their officers will only be liable for civil penalty proceedings in respect of continuous disclosure obligations where they have acted with “knowledge, recklessness or negligence” – introducing a state of mind element to the continuous disclosure obligation.  The amendments also ensure that the corresponding misleading conduct provisions in the Corporations Act and ASIC Act contain consistent defences with this new state of mind standard.  These amendments, which have been welcomed by the AICD and other director advocacy groups, follow from the granting of temporary relief through the Treasurer’s COVID-19 emergency powers and then a Senate Economic References Committee Report in June 2021 which recommended against the reforms (that report was discussed in detail in G+T’s previous article).  While the ambit of penalties are softened, our view as set out in last week’s article is that we do not anticipate that the amendments will undermine market confidence in corporate disclosure, integrity or accountability.  The reforms recognise that many disclosure issues involve difficult judgments made under significant time pressure with imperfect information – but Directors should approach continuous disclosure obligations with the same rigour and care.

A review of public M&A in 2021.  G+T has published its Public M&A in Australia: 2021 half year update, noting that the market for mergers and acquisitions in this period has been supercharged, with almost $150 billion of public and private deals being announced in Australia and New Zealand (including $6.72 billion in binding deals involving ASX-listed targets).  The key trends set out in this article reassure that notwithstanding the pandemic and geopolitical tensions, M&A confidence is high.  The ingredients for successful M&A experienced in the first half of 2021 should also continue into the second half of the calendar year – with low interest rates and pension and super fund money providing the much needed capital, ESG and shareholder activism pushing M&A and companies seeking to position themselves to take advantage of the changing world on a technological and energy basis.  As the Delta variant continues to impact countries around the globe, it is also reasonable to expect that bidders will continue to take advantage of targets whose businesses are struggling through COVID-19. 

Treasury releases exposure draft of superannuation reporting legislation for comment.  The Treasury has introduced draft legislation which imposes various financial reporting and auditing obligations on registrable superannuation entities (excluding self-managed super funds).  These reforms seek to impose financial reporting and auditing obligations on applicable superannuation entities which are consistent with those which current apply to public companies.  The exposure draft has been released, and will require applicable superannuation entities to (1) prepare and lodge financial reports with ASIC for each financial year and half-year, (2) publish the financial report, directors’ report and auditors’ report for each financial year on its website and (3) provide a copy of its financial reports to members and beneficiaries on request.  Consultation on the exposure draft is open until 8 September 2021.  See the Treasury’s media release.


Climate risks - now “unequivocally” a consideration for Directors. As many Directors will already be aware, the Intergovernmental Panel on Climate Change (IPCC) recently published its most comprehensive report on the impact of climate change to date.  With the scientific linkage between climate change and human activity now said to be “unequivocal”, Directors will need to consider how their companies contribute to climate change to date, and how best to address the climate change risk moving forward.  The IPCC notes that “strong and sustained reductions” in CO2 and other greenhouse gases may limit the impact of climate change, which will no doubt encourage more companies to make the kind of “net zero” pledges which have become commonplace over the past 12 months.  Expectations among regulator, shareholder and external stakeholder levels are beginning to converge, and in our view a change (or more likely refinement) in Government policy is likely to follow.  Directors will therefore need to determine whether it is appropriate to give additional prominence to climate change risk, particularly as we near the reporting season for entities with a June financial year end.  Our Clean Energy + Decarbonisation hub contains a range of articles setting out further considerations for Directors to consider in this area.  

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